| Item | Monthly | Annual |
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| Investment Income | Monthly | Annual |
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Foreign Income and the Income Tax Progression Clause (Progressionsvorbehalt)
If you entered foreign income, the simulation applies the progression clause (§ 32b EStG): the tax rate that would apply to your taxable income plus the foreign income is applied to your German taxable income only. The foreign income itself is not taxed in Germany where a treaty exemption applies.
The actual treatment depends on the specific double taxation treaty, the type of income and your residency status in both countries. Always seek professional advice for cross-border income situations.
Moving to or Leaving Germany During the Year
In the year you move to Germany or leave Germany, you are a German tax resident for only part of the year. Germany still issues one tax assessment for the whole calendar year. Income earned while you were a German tax resident is taxed in Germany. Foreign income earned during the months without German tax residency is not taxed in Germany, but it increases your German tax rate through the progression clause (§ 32b (1) sentence 1 no. 2 EStG). The full basic allowance (Grundfreibetrag) applies.
How to enter a mid-year move: enter your German salary and your other German taxable income for the months of German tax residency in the income fields. Enter the foreign income you earned before your move or after your departure in the field "Foreign income exempt under a tax treaty".
Please note: social security contributions are estimated with the full annual contribution ceilings and assume a salary paid over twelve months. If you worked in Germany for only part of the year, actual contributions can be lower for high salaries, and a part-year salary may be classified differently as a minijob or midijob.
Important: This Is a Simulation, Not a Tax Assessment
Results are based on the German income tax tariff (§ 32a EStG), the Solidarity Surcharge Act, church tax rates, the statutory allowances and the social security parameters of the selected year. Not reflected are, among others: private health insurance, extraordinary burdens, tax credits (e.g. household services), loss carryforwards, church tax caps (Kappung), the special church levy for couples where only one spouse is a church member (besonderes Kirchgeld), treaty tie-breaker rules, crediting of foreign taxes and decisions of the tax office. Salaries are assumed to be paid evenly over twelve months.
Do not rely on this simulation for financial or tax planning decisions. For an accurate, personalised assessment, especially with foreign income, US tax obligations or other cross border situations, consult a qualified tax advisor who specialises in expat taxation.
There are many free tax calculators available on the internet but often they are very misleading for expats. Usually, German tax calculators are not designed for expats because they assume a simple life with one employer, one salary and all income earned and taxed in Germany.
Most of our clients at Prinz.tax do not fit into this box: Expats may have moved to Germany during the year, may earn income from Germany and from abroad, often they have worldwide investment income and sometimes rental income from their home country or retirement benefits, RSU/stock compensation, or bonus payments from foreign sources.
This is what makes the Prinz.tax German tax calculator unique for expats: We built this German tax simulator to handle the various layers of income and have developed a state of the art tool at four distinct levels:
Level 1: German Employment Income
Your German gross salary faces two distinct deductions: progressive income tax (§ 32a EStG) and statutory social security (health, pension, nursing care, and unemployment contributions). If you receive an employment offer from an employer in Germany, keep in mind that your gross income will be subject to both income tax and (usually mandatory) social security contributions. The Prinz.tax German tax calculator simulates both aspects.
Level 2: Side Income, Rental & Freelance Work
Earnings outside standard employment are often not subject to social security contributions but are taxed at your individual (progressive) income tax rate under § 32a EStG. The Prinz.tax German tax calculator therefore has a separate input for your income that is taxable in Germany but exempt from social security tax.
Level 3: Investment Income (Abgeltungsteuer)
Germany generally taxes investment income like capital gains, dividends, and interest at a flat 25% tax rate plus solidarity surcharge. Please note that instead of individual deductions for costs incurred in relation to your investment income, a standard €1,000 annual allowance ("Sparerpauschbetrag" under § 20 (9) EStG) will be applied which is automatically incorporated in our German tax calculator. Further tax benefits may exist for investments in funds and ETFs (partial tax exemption, "Teilfreistellung"). Be aware that additional restrictions exist for offsetting losses and gains from financial investments.
Level 4: Tax Exempt Foreign Income with an Impact on Your German Tax Rate (Progressionsvorbehalt)
Often, tax treaties (Double Taxation Agreements, DTAs) between Germany and your home country assign the right to tax to a foreign jurisdiction. Under German tax law, this foreign income is usually exempt from direct taxation but has an indirect impact on your taxes in Germany through the so called progression clause ("Progressionsvorbehalt" under § 32b EStG). This concept pushes your income subject to direct taxation in Germany into a higher tax bracket. The Prinz.tax German tax calculator determines your actual adjusted tax rate under consideration of the income tax progression effect.
Why the Prinz.tax multi level tax calculation concept matters
Basic tax rates, social security contributions, separate income tax rates for investment income, and tax implications for foreign earned income do not exist in isolation. Most tax calculations are focused on single salary income and entirely miss the complexity of worldwide income and the complexity of the German tax system. Our unique German tax calculator combines the various levels into a state of the art tax simulation to assist you in making a well informed decision.
Read the full guide with worked examples on our blog: German Tax Calculator for Expats: How the Simulator Works
What is tax residency in Germany?
German tax residency is based on two criteria: a permanent home (Wohnsitz, § 8 AO) or habitual abode (gewöhnlicher Aufenthalt, § 9 AO). Tax residents are taxed on worldwide income, while non-residents are taxed only on German source income. For details refer to our blog: Tax Residency in Germany: Everything Expats Need to Know. The free Prinz.tax German income tax calculator is built for tax residents with worldwide income.
What taxes do expats pay in Germany?
Expats who are tax residents typically pay progressive income tax, the Solidarity Surcharge, church tax (if they belong to a church registered in Germany as church tax eligible), and social security contributions if they are employees. Investment income is taxed separately at a flat tax rate (Kapitalertragsteuer and Solidaritätszuschlag). Our German income tax calculator combines all of these into one estimate based on your actual situation, employment income, other income, investment income and foreign income.
How do I calculate my German income tax as an expat?
As an expat you need to be aware that often several types of income need to be combined and are not always fully taxed or not taxed at the same tax rate. Most German income tax calculators are not designed to handle a combination of employment income, side income, investment income (taxed at a flat rate), and foreign income (that can affect your tax rate through the progression clause). The following article explains details: What Income Tax Will I Pay in Germany as an Expat? Rates, Deductions And Our Tax Simulator. Enter each of these into our German income tax calculator to estimate your personal income tax burden in Germany.
What is my individual tax rate in Germany as an expat?
Germany uses a progressive tax rate under § 32a EStG, so your personal tax rate rises with income, and your marginal rate on the next Euro you earn is usually higher than your average rate. Under most tax treaties, certain foreign income is exempt from direct taxation but has an impact on the German tax rate through the progression clause. Our German income tax calculator estimates both your average and your adjusted marginal tax rate based on your entire worldwide income, not just your income from sources in Germany.
Want to see German income tax rates displayed? A graphical display of tax rates can be found on the website of the German Ministry of Finance (BMF) Lohn- und Einkommensteuerrechner: Einkommensteuer - Berechnung.
How is investment income taxed in Germany?
Investment income such as dividends, interest and (realized) capital gains is generally taxed at a flat rate of 25% (Kapitalertragsteuer under §§ 43, 32d (1) EStG) plus the Solidarity Surcharge (under SolZG). A standard annual allowance of 1,000 EUR per person (Sparerpauschbetrag under § 20 (9) EStG) applies. For details refer to the following article: A Guide for Expats in Germany on Taxation of Investment Income (Kapitalertragsteuer). The investment income section in our German income tax calculator will automatically calculate your German taxes. Please note, that under certain circumstances, if the provisions of a tax treaty (Double Taxation Agreement, DTA) permits, you may be able to credit certain foreign taxes against your German Kapitalertragsteuer.
How is foreign rental income taxed in Germany?
Whether foreign rental income is taxed in Germany or only affects your German tax rate depends on the double taxation agreement (DTA) between Germany and the country where the property is located. Often, foreign rental income is exempt from direct taxation in Germany but still raises your German tax rate through the income tax progression clause (§ 32b EStG). Because both a direct taxation and an indirect impact on the tax rate can be possible, rental income may be entered in the "other income" or the "foreign income" section of our German income tax calculator. A more detailed analysis of foreign rental income can be found in this article: Rental Income from Foreign Real Estate While Living in Germany. If you are unsure about the correct tax treatment, we would be happy to assist you.
How does the double taxation agreement between Germany and the US prevent double taxation?
The US-Germany tax treaty assigns taxing rights for different income types to one country or the other and allows exemption or credit methods, so the same income is not fully taxed twice. For details, refer to the following article: How U.S. Citizens in Germany Avoid Double Taxation: Foreign Earned Income Exclusion (FEIE) vs. Foreign Tax Credit (FTC). As a US citizen you will usually remain subject to US filing obligations regardless of German tax residency. Our German income tax calculator reflects the German side of this through the progression clause field, showing how treaty exempt income can still affect your German tax rate.
How do I file taxes in Germany on international income?
Filing taxes in Germany on international income starts with determining your tax residency. German tax residents are taxed on their worldwide income. Non-residents are usually only taxed on their income from domestic sources. Please note, that the tax year equals the calendar year and generally all income incurred during a tax year should be reported in your German income tax return, if subject to unlimited taxation. If you have already received a letter from the German tax office to file your income tax return and are unsure what to do, find out more here: What to Do If the German Tax Office Demanded Your Income Tax Return: A Step-by-step Guide for Expats. Use our free German income tax calculator to estimate what to expect as a person with international income or possibly a tax residence only during a portion of the entire tax year.
What is the difference between my average tax rate and my marginal tax rate in Germany?
An average tax rate is calculated by dividing your total income tax by your gross income before any deductions. A marginal tax rate is defined by the tax rate applicable to every Euro you earn in excess of your current income. The marginal tax rate including income tax, solidarity surcharge, and church tax can be as high as 49.5%. Your marginal tax rate primarily matters when assessing the impact of a raise or bonus or the positive impact of claiming a tax deduction (e.g. employment-related deductible expenses, donations, or deductible pension savings). The Prinz.tax German income tax calculator shows you a percentage rate for each of these rates.
Are your German income taxes higher than expected?
Our specialists help expats optimise cross-border income situations, reduce double taxation and navigate German and international tax law, personally and in English.
